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"But, my home appraised for..."

Real Estate Agent with Coldwell Banker Faucette Real Estate

 "Where, Oh Where Did My Equity Go..."

A new situation is facing the real estate market that doesn't receive the "press time" it deserves.  HELOC's,  the real estate boom created an enormous amount of paper wealth in the portfolio's of homeowner's across the country.  However, unlike 401k or retirement paper gains, the gains in the value of your home are more easily accessible than ever before.

How many of you opened up your mailbox over the last 3 years to find a mock check for some outrageous amount of money and a 800 number followed by the phrases...No Closing Cost, No Payments...or the like.
The offer was hard to resist....and millions of homeowners could not.

While the banks reaped record profits...the american homeowner was draining the "silent savings account" that has blessed families for generations, home equity. And the economy was booming with this new found wealth.

Now the tide has shifted.  If you took out a home equity line of credit in 2004 when the prime rate was 4 percent, you have seen the interest rate on your line of credit more than double to 8.25+ percent today.

Home equity loans were originally designed to finance home improvements, not to support a "beyond your means" lifestyle.  That makes sense because improvements add equity value to your home, which increases the collateral value for the loan. If you run into financial difficulties that force you to sell the home, the increased market value would hopefully cover the additional debt.

Now as real estate agents we have to sit back and watch.  It is not simply the people who purchased at the top of the market who are struggling, but also the homeowner who has extracted their equity through a HELOC.  And we are left to respond to the dreaded statement, "But, my home appraised for..."

Thanks for listening...
Devon Cerniga